Used car prices are finally coming down, and by the latest measure, they could be dropping hard.
According to the latest Consumer Price Index (CPI), used car prices fell about 0.5% in June 2023 and a whopping 5.2% year over year. That means, a used car that would have cost you $10,000 in June 2022 would have hypothetically cost you $520 less in June of this year.
If you've gotten used to rising prices on cars, then you might welcome this as good news, especially if you're currently shopping for a used car. Used cars can be significantly cheaper than newer models, not only on the sticker price but on car insurance premiums, too.
But just because car prices have declined broadly, does that mean now is the right time to buy a used car? Let's take a closer look at the data and see if it will save you money.
Understand which used cars are declining in price
Now, just because the general direction of used car prices is trending downward that doesn't mean the car you're looking for has declined in price. In fact, some cars have actually gotten more expensive over the last year, even while most makes and models have gotten cheaper.
The CPI doesn't break used car prices into makes and models. But the automotive research site CarGurus does have an index that aligns closely with the CPI and will separate car types to give you a better idea of how their prices are changing. Here's how the prices on some popular car types have moved year over year:
| Car type | Year-over-year change |
|---|---|
| Convertible | 5.21% |
| Coupe | -1.01% |
| Pickup Truck | -1.42% |
| SUV | -3.12% |
| Minivan | -5.12% |
| Crossover | -6.19% |
| Hatchback | -6.89% |
| Wagon | -7.10% |
| Sedan | -7.96% |
| Van | -11.55% |
Data source: CarGurus, July 18, 2023.
So, according to CarGurus data, the price of vans, sedans, and wagons have declined the most year over year, while coupes and pickup trucks have declined the least (with convertibles actually getting more expensive). Now let's see how prices have changed on some of the most popular car makes in the U.S.:
| Make | Year-over-year change | Average price |
|---|---|---|
| Jeep | +2.56% | $28,220 |
| Ford | -2.11% | $30,171 |
| Chevrolet | -2.48% | $29,606 |
| Hyundai | -3.61% | $20,251 |
| RAM | -4.29% | $39,550 |
| Toyota | -4.53% | $27,143 |
| Nissan | -7.07% | $20,991 |
| Kia | -7.28% | $21,107 |
| Honda | -7.34% | $22,361 |
| Tesla | -35.55% | $43,617 |
Data source: CarGurus, July 18, 2023.
Based on CarGurus' data, many popular car brands (excluding Jeep) have seen a decline in price. That said, only four makes (Nissan, Kia, Honda, and Tesla) have declined more significantly than the general price decline as recorded in the CPI, while five makes have actually declined by rates of less than 5.2%.
Used cars are getting cheaper, but don't lower your guard
Used cars might be significantly cheaper this year than they were in 2022. But whether they're cheaper for you will depend on a few factors.
First off, the price you pay for a car doesn't always match up to the agreed-upon price with the seller. That's because some used cars come with hidden problems that will add on to the sticker price later. It's important to test drive a used car before buying, as well as to call attention to strange noises, smells, and other things that don't "seem right." Trust me -- you don't want to buy a low-priced car only to realize you got a lemon.
Secondly, if you're going to finance the car purchase, first look for the best auto loans with the lowest APRs. In this high-rate environment, it's quite expensive to borrow money, and your interest payments could work against whatever you're saving by buying a used car. Better yet, if you can pay cash, you can avoid interest payments altogether.
Is now the right time to buy a used car?
Truth be told, the right time to buy a used car is when you need one. That said, prices on most used cars are lower today than they were last year, and it's not clear if prices will go back up or continue this downward trend. Check out used car sites for yourself -- such as CarGurus, Craigslist, Carvana, or CarMax -- but if you're ready to buy a used car, now might be a good time to start shopping.
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July 23, 2023 at 08:00PM
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